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COLUMBIA LABORATORIES INC

SEC Form 10-Q/A filed 2010-07-30 for the period ending 2010-03-31

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Selected tables from the SEC filing

Table 0

Financial table in standard format

COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2010 (Restated)*			2009
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents of which $9,220,493 in 2010 and $12,225,732 in 2009 is interest bearing	$	11,284,243		$	14,757,615
Accounts receivable, net of allowances for doubtful accounts of $100,000 in 2010 and 2009, respectively		3,297,668			4,262,851
Inventories		3,088,990			2,532,722
Prepaid expenses and other current assets		1,009,323			1,097,525
Total current assets		18,680,224			22,650,713

Property and equipment, net		637,812			691,479
Intangible assets - net		17,509,150			18,770,332
Other assets		1,434,024			1,644,695

TOTAL ASSETS	$	38,261,210		$	43,757,219

LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Current portion of financing agreements	$	58,563		$	144,897
Accounts payable		2,805,472			3,662,091
Accrued expenses		5,512,142			4,588,088
Derivative embedded within convertible notes, fair value		5,848,150			-
Total current liabilities		14,224,327			8,395,076

Notes payable		33,749,209			32,965,863
Deferred revenue		312,181			328,367
Long-term portion of financing agreements		15,867,735			15,234,406
TOTAL LIABILITIES		64,153,452			56,923,712

COMMITMENTS AND CONTINGENCIES

Contingently Redeemable Series C Preferred Stock, 600 shares issued and outstanding in 2010 and 2009, respectively (liquidation preference of $600,000)		600,000			600,000

SHAREHOLDERS' DEFICIT:
Preferred stock, $.01 par value;1,000,000 shares authorized
Series B Convertible Preferred Stock, 130 shares issued and outstanding (liquidation preference of $13,000)		1			1
Series E Convertible Preferred Stock, 59,000 shares issued and outstanding (liquidation preference of $5,900,000)		590			590
Common Stock $.01 par value; 100,000,000 shares authorized; 65,761,986 shares issued in 2010 and 2009, respectively		657,619			657,619
Capital in excess of par value		243,191,797			242,637,646
Less cost of 152,795 and 131,935 treasury shares in 2010 and 2009, respectively		(306,369	)		(280,813	)
Accumulated deficit		(270,224,789	)		(256,979,263	)
Accumulated other comprehensive income		188,909			197,727
Shareholders' deficit		(26,492,242	)		(13,766,493	)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$	38,261,210		$	43,757,219

COLUMBIA LABORATORIES INC CIK:821995
	2010-03-31	2009-12-31
Inventories	3,088,990	2,532,722
Prepaid expenses and other current assets	1,009,323	1,097,525
Total current assets	18,680,224	22,650,713
Property and equipment, net	637,812	691,479
Intangible assets - net	17,509,150	18,770,332
Other assets	1,434,024	1,644,695
TOTAL ASSETS	$38,261,210	$43,757,219
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Current portion of financing agreements	$58,563	$144,897
Accounts payable	2,805,472	3,662,091
Accrued expenses	5,512,142	4,588,088
Derivative embedded within convertible notes, fair value	5,848,150
Total current liabilities	14,224,327	8,395,076
Notes payable	33,749,209	32,965,863
Deferred revenue	312,181	328,367
Long-term portion of financing agreements	15,867,735	15,234,406
TOTAL LIABILITIES	64,153,452	56,923,712
COMMITMENTS AND CONTINGENCIES
Contingently Redeemable Series C Preferred Stock,600 shares issued and outstanding in 2010 and 2009, respectively(liquidation preference of $600,000)	600,000	600,000
SHAREHOLDERS' DEFICIT:
Preferred stock, $.01 par value;1,000,000 shares authorized
Series B Convertible Preferred Stock, 130 shares issued andoutstanding (liquidation preference of $13,000)	1	1
Series E Convertible Preferred Stock, 59,000 shares issued andoutstanding (liquidation preference of $5,900,000)	590	590
Common Stock $.01 par value; 100,000,000 sharesauthorized; 65,761,986 shares issued in 2010 and 2009,respectively	657,619	657,619
Capital in excess of par value	243,191,797	242,637,646
Less cost of 152,795 and 131,935 treasury shares in2010 and 2009, respectively	(306,369)	(280,813)
Accumulated deficit	(270,224,789)	(256,979,263)
Accumulated other comprehensive income	188,909	197,727
Shareholders' deficit	(26,492,242)	(13,766,493)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$38,261,210	$43,757,219

Table 1

Financial table in standard format

COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

	Three Months Ended
	March 31,
	2010 (Restated)*			2009

NET REVENUES	$	7,172,899		$	7,321,187

COST OF REVENUES		1,176,579			1,780,018
Gross profit		5,996,320			5,541,169

OPERATING EXPENSES:
Selling and distribution		3,250,319			2,793,236
General and administrative		4,126,318			2,488,553
Research and development		2,341,818			2,245,385
Amortization of licensing right		1,261,182			1,261,182
Total operating expenses		10,979,637			8,788,356

Loss from operations		(4,983,317	)		(3,247,187	)

OTHER INCOME (EXPENSES):
Interest income		1,620			19,197
Interest expense		(2,302,794	)		(2,048,101	)
Change in fair value of derivative		(5,848,150	)		-
Other, net		(110,685	)		(40,546	)
Total other expenses		(8,260,009	)		(2,069,450	)

Loss before taxes		(13,243,326	)		(5,316,637	)
State income taxes		(2,200	)		(16,930	)
NET LOSS	$	(13,245,526	)	$	(5,333,567	)

NET LOSS PER COMMON SHARE:
Basic and diluted	$	(0.20	)	$	(0.10	)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic and diluted		65,388,921			54,296,686

COLUMBIA LABORATORIES INC CIK:821995
	2009-12-31 to 2010-03-31 (3-months)	2008-12-31 to 2009-03-31 (3-months)
NET REVENUES	$7,172,899	$7,321,187
COST OF REVENUES	1,176,579	1,780,018
Gross profit	5,996,320	5,541,169
OPERATING EXPENSES:
Selling and distribution	3,250,319	2,793,236
General and administrative	4,126,318	2,488,553
Research and development	2,341,818	2,245,385
Amortization of licensing right	1,261,182	1,261,182
Total operating expenses	10,979,637	8,788,356
Loss from operations	(4,983,317)	(3,247,187)
OTHER INCOME (EXPENSES):
Interest income	1,620	19,197
Interest expense	(2,302,794)	(2,048,101)
Change in fair value of derivative	(5,848,150)
Other, net	(110,685)	(40,546)
Total other expenses	(8,260,009)	(2,069,450)
Loss before taxes	(13,243,326)	(5,316,637)
State income taxes	(2,200)	(16,930)
NET LOSS	$(13,245,526)	$(5,333,567)
NET LOSS PER COMMON SHARE:
Basic and diluted	$(0.20)	$(0.10)
WEIGHTED AVERAGE NUMBER OFCOMMON SHARES OUTSTANDING:
Basic and diluted	65,388,921	54,296,686

Row "WEIGHTED AVERAGE NUMBER OFCOMMON SHARES OUTSTANDING:": Multi-column field in a numeric row

Table 2

Financial table in standard format

In connection with the 1989 purchase of the assets of Bio-Mimetics, Inc., which assets consisted of certain patents underlying the Companys BDS, other patent applications and related technology, the Company pays Bio-Mimetics, Inc. a royalty equal to two percent (2%) of the net sales of products based on the assets purchased from Bio-Mimetics, Inc., up to an aggregate of $7.5 million or until the last of the relevant patents expire. The Company is required to prepay 25% of the remaining maximum royalty obligation, in cash or stock at the option of the Company, within 30 days of March 2 of any year in which the closing price on that date of the Companys Common Stock on any national securities exchange is $20 or more. Through March 31, 2010, the Company has paid approximately $3.9 million in royalty payments to Bio-Mimetics . Due to expiration in September 2006 of certain patents purchased from Bio-Mimetics, Inc., royalties to Bio-Mimetics, Inc. are no longer paid on CRINONE, PROCHIEVE, or STRIANT products. Bio-Mimetics, Inc. has sued us for breach of contract and seeks a judgment that we are obligated to pay the remaining $3.6 million in full. The Company has denied all such allegations and believes it has no contractual liability to Bio-Mimetics, Inc. for disputed royalty payments and intends to defend this action vigorously.
On October 22, 2009, the Company entered into a Placement Agent Agreement with Oppenheimer & Co. Inc. (Oppenheimer") and The Benchmark Company, LLC ("Benchmark"), as placement agents (collectively, the Placement Agents), relating to a registered direct offering of 10,900,000 shares of the Companys Common Stock and warrants to purchase 5,450,000 shares of Common Stock (the Offering).On October 28, 2009 the Company consummated the sale of 10,900,000 shares of its Common Stock and warrants to purchase 5,450,000 shares of its Common Stock in a registered direct offering for gross proceeds of $11,722,000. The Common Stock and warrants were sold in units, with each unit consisting of one share of Common Stock and a warrant to purchase 0.5 shares of Common Stock at a price of $1.08 per unit. The warrants will be exercisable at an exercise price of $1.52 per share of Common Stock, subject to adjustments, at any time on or after April 30, 2010 and ending on April 30, 2015. The Company received net proceeds of approximately $10,709,000 from the offering after offering-related fees and expenses. The Company paid the Placement Agents a fee equal to 6.5% of the gross proceeds received by the Company from the Offering (the Placement Fee).The shares and warrants were offered pursuant to an existing effective shelf registration statement on Form S-3 (Registration No. 333-155530) which was declared effective by the SEC on December 5, 2008.
On March 3, 2010, we entered into contingent agreements with PharmaBio and the holders of our Convertible Notes under which, if the Watson Transaction closes and the other conditions to consummation of such agreements are satisfied, we will repay our outstanding debt on an accelerated and discounted basis and issue the holders of Convertible Notes shares of common stock and warrants to purchase common stock.See Note 13 included in "Item 1. Financial Statements.
As of March 31, 2010, the Company had outstanding exercisable options and warrants that, if exercised, would result in approximately $52.4 million of additional capital and would cause the number of shares outstanding to increase. Options and warrants outstanding at March 31, 2010 were 5,887,704 and 10,942,755, respectively.However, there can be no assurance that any such options or warrants will be exercised. The aggregate intrinsic value of exercisable options and warrants at March 31, 2010 and March 31, 2009 was $0.0 million and $0.0 million respectively.
Significant expenditures anticipated by the Company in the near future are concentrated on research and development related to new products and new indications for currently approved products.
Watson Transactions
On March, 3, 2010, Columbia entered into a definitive agreement to sell, subject to stockholder approval, substantially all of its progesterone related assets, including its preterm birth patents and applications and 11.2 million shares of common stock, to Watson Pharmaceuticals, Inc. (the Watson Transactions) for upfront and milestone payments of up to $92.5 million.These include a $47 million upfront payment plus royalties of 10 to 20 percent of annual net sales of certain progesterone products. Additional payments up to $45.5 million can be earned by the successful completion of clinical development milestones in the ongoing PREGNANT Study, regulatory filings, receipt of regulatory approvals and product launches. Watson will fund the development of a second-generation vaginal progesterone product as part o f a comprehensive life-cycle management strategy. The closing of the transaction is subject to customary conditions, including approval by Columbias stockholders. Columbia will retain certain assets and rights to its progesterone business, including all rights necessary to perform its obligations under its agreement with Merck Serono S.A.See Note 13 included in "Item 1. Financial Statements.
ADDITIONAL INFORMATION ABOUT THE WATSON TRANSACTIONS AND WHERE TO FIND IT
This communication is not a solicitation of a proxy from any security holder of Columbia. In connection with stockholder approval of the sale of the assets contemplated by the Purchase and Collaboration Agreement and certain other matters, Columbia has filed with the SEC a preliminary proxy statement and intends to file a definitive proxy statement and to mail to its security holders a definitive proxy statement and other materials. THE PROXY STATEMENT WILL BE SENT TO COLUMBIA SECURITY HOLDERS AND WILL CONTAIN IMPORTANT INFORMATION ABOUT COLUMBIA, WATSON, THE SALE OF THE ASSETS PURSUANT TO THE PURCHASE AND COLLABORATION AGREEMENT, AND RELATED MATTERS. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC CAREFULLY WHEN THEY ARE AVAILABLE BEFORE MAKING ANY VOTING OR INV ESTMENT DECISION WITH RESPECT TO THE PROPOSED SALE OF THE ASSETS AND THE OTHER MATTERS DESCRIBED THEREIN. Free copies of the proxy statement and other documents filed with the SEC by Columbia, when they become available, can be obtained through the website maintained by the SEC at www.sec.gov. In addition, free copies of the proxy statement will be available from Columbia by contacting Lawrence A. Gyenes at (973) 486-8860 or lgyenes@columbialabs.com, or on Columbias investor relations website at www.cbrxir.com.
PARTICIPATION IN THE SOLICITATION
Columbia and its directors and executive officers and certain other members of management may be deemed to be participants in the solicitation of proxies from Columbia's stockholders in connection with the proposed transactions described herein. Information regarding the special interests of these directors, executive officers and members of management in the proposed transactions will be included in the proxy statement and other relevant documents filed with the SEC. Additional information regarding Columbias directors and executive officers is also included in Columbias Annual Report on Form 10-K/A for the fiscal year ended December 31, 2009, which was filed with the SEC on April 30, 2010. Columbias Form 10-K/A is available free of charge at the SECs website at www.sec.gov and from Columbia by contacting it as described above.
Contractual Obligations, Commercial Commitments and Off-Balance Sheet Arrangements
The Companys contractual obligations, commercial commitments and off-balance sheet arrangements disclosures in its Annual Report on Form 10-K/A for the year ended December 31, 2009, have not materially changed since that report was filed.
Recent Accounting Pronouncements
In October2009, the Financial Accounting Standards Board (FASB) issued ASU No.2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements (a consensus of the FASB Emerging Issues Task Force), which amends ASC 605-25, Revenue Recognition: Multiple-Element Arrangements. ASU No. 2009-13 addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting and how to allocate consideration to each unit of accounting in the arrangement. This ASU replaces all references to fair value as the measurement criteria with the term selling price and establishes a hierarchy for determining the selling price of a deliverable. ASU No.2009-13 also eliminates the use of the residual value method for determining the allocation of arrangement con sideration. Additionally, ASU No.2009-13 requires expanded disclosures. This ASU will become effective for revenue arrangements entered into or materially modified after the fiscal year 2010. Earlier application is permitted with required transition disclosures based on the period of adoption. We are currently evaluating the application date and the impact of this standard on our consolidated financial statements.
Critical Accounting Policies and Estimates
The
Company has identified the policies below as critical to its business operations and the understanding of its
results of operations. For a detailed discussion on the application of these and other accounting policies, seeNote 1 of the consolidated financial statements included in Item 15 of the Annual Report on Form 10-K/A for the year ended December 31, 2009, beginning on page F-10. Note that the preparation of this Quarterly Report on Form 10-Q requires the Company to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses duri ng the reporting period. There can be no assurance that actual results will not differ from those estimates.
Revenue Recognition.
The Companys revenue recognition is significant because revenue is a key component of our results of operations. In addition, revenue recognition determines the timing of certain expenses, such as commissions and royalties. Revenue results are difficult to predict, and any shortfall in revenue or delay in recognizing revenue could cause operating results to vary significantly from quarter to quarter. License fees are recorded over the life of the license.Royalty revenues, based on sales by licensees, are recorded as revenues as those sales are made by licensees.
Sales Returns
.
Revenues from the sale of products are recorded at the time goods are shipped to customers. The Company believes that it has not made any shipments in excess of its customers' ordinary course of business inventory levels. Our return policy allows product to be returned for a period beginning three months prior to the product expiration date and ending twelve months after the product expiration date. Provisions for returns on sales to wholesalers, distributors and retail chain stores are estimated based on a percentage of sales, using such factors as historical sales informat ion, distributor inventory levels and product prescription data, and are recorded as a reduction to sales in the same period as the related sales are recognized. We also continually analyze the reserve for future sales returns and increase such reserve if deemed appropriate. The Company purchases prescription data on all its products from IMS Health, a leading provider of market intelligence to the pharmaceutical and healthcare industries. The Company also purchases certain information regarding inventory levels from its larger wholesale customers. This information includes for each of the Company products, the quantity on hand, the number of days of inventory on hand, and a 28 day forecast of sales by units. Using this information and historical information, the Company estimates potential returns by taking the number of product units sold by the Company by expiration date and then subtracting actual units and potential units that may be sold to end users (consumers) based on prescription data up to five months prior to the products expiration date. The Company records a provision for returns on a quarterly basis using an estimated rate and adjusts the provision if its analysis indicates that the potential for product non-salability exists. Sales adjustments for international sales are estimated to recognize changes in foreign exchange rates and government tenders that may fluctuate within a year.
Accounting For PharmaBio Agreements.
In March 2003, the Company entered into the STRIANT Agreement with PharmaBio under which the Company received upfront money paid in quarterly installments in exchange for royalty payments on certain of the Companys products to be paid to PharmaBio for a fixed period of time. The royalty payments are subject to minimum and maximum amounts. Because the minimum amount exceeds the amount received by the Company, the Company has recorded the monies received as liabilities. We are recording the excess of the minimum to be paid by the Company over the amount received by the Company as interest expense over the term of the agreement.
Stock-Based Compensation Employee Stock-Based Awards.
Commencing January 1, 2006, the Company adopted ASC 718,
Share Based Payment
, formerly SFAS 123(R),which requires all share based payments, including grants of stock options, to be recognized in the income statement as an operating expense, based on their fair values. In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (SAB 107) providing supplemental implementation guidance for SFAS 123(R). The Company has applied the provisions of SAB 107 in its adoption of ASC 718.

	Three Months Ended
	March 31,
	2010	2009
Risk free interest rate	-	1.78%
Expected term	-	4.6 years
Dividend yield	-	0
Expected volatility	-	0.9295

COLUMBIA LABORATORIES INC CIK:821995
	2009-12-31 to 2010-03-31 (3-months)	2009-03-31
Dividend yield		0
Expected volatility		0.9295

Data column 2: Period of report is either

Original filing from SEC EDGAR system.